Annual Report - VÃB banka
Annual Report - VÃB banka
Annual Report - VÃB banka
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35. Profit before changes in operating assets and liabilities<br />
2007 2006<br />
Profi t before tax 5,215 4,820<br />
Adjustments for:<br />
Amortization 504 470<br />
Depreciation 615 601<br />
Unrealized (profi t)/loss from securities held for trading<br />
and available-for-sale securities (66) (11)<br />
Share of loss of associates and jointly controlled entities (7) 52<br />
Interest income (14,788) (12,328)<br />
Interest expense 6,279 4,791<br />
Dividend income - (12)<br />
Income / (loss) on sale of property and equipment 9 (41)<br />
Provisions and impairment losses 858 369<br />
Interest received 14,245 12,830<br />
Interest paid (5,970) (4,580)<br />
Dividends received - 12<br />
Tax received / (paid) 274 (1,436)<br />
7,168 5,537<br />
36. Estimated fair value of financial assets and liabilities<br />
The fair value of fi nancial instruments is the amount<br />
for which an asset could be exchanged, or a liability<br />
settled, between knowledgeable, willing parties<br />
in an arm’s length transaction. Where available, fair<br />
value estimates are made based on quoted market<br />
prices. However, no readily available market prices<br />
exist for a signifi cant portion of the Group’s fi nancial<br />
instruments. In circumstances where the quoted<br />
market prices are not readily available, the fair value<br />
is estimated using discounted cash fl ow models<br />
or other pricing models as appropriate. Changes in<br />
underlying assumptions, including discount rates<br />
and estimated future cash fl ows, signifi cantly affect<br />
the estimates. Therefore, the calculated fair market<br />
estimates might not be realized in a current sale of<br />
the fi nancial instrument.<br />
In estimating the fair value of the Group’s fi nancial<br />
instruments, the following methods and assumptions<br />
were used:<br />
(b) Loans and advances to banks<br />
The estimated fair value of amounts due from banks<br />
approximates their carrying amounts. Provisions<br />
are taken into consideration when calculating fair<br />
values.<br />
(c) Loans and advances to customers<br />
The fair value of loans and advances to customers<br />
is estimated using discounted cash fl ow analyses,<br />
based upon the risk free interest rate curve adjusted<br />
by relevant credit spreads. Provisions are taken<br />
into consideration when calculating fair values.<br />
(d) Held-to-maturity investments<br />
The fair value of securities carried in the ‘Held-tomaturity<br />
investments’ portfolio is based on quoted<br />
market prices. Where no market prices are available,<br />
the fair value was calculated by discounting<br />
future cash fl ows using risk free interest rate curve<br />
adjusted to refl ect credit risk.<br />
51<br />
(a) Cash and balances with central banks<br />
The carrying values of cash and cash equivalents<br />
are generally deemed to approximate their fair value.<br />
(e) Investments in associates and jointly controlled<br />
entities<br />
The estimated fair value of investment in associates<br />
and jointly controlled entities approximates their<br />
carrying amounts.<br />
VUB, a bank of Intesa Sanpaolo group
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